The shifting oil trade flows that began after Russia’s invasion of Ukraine in February are here to stay, but their impact on VLCCs might take some time to see, a Euronav executive says.
Speaking at Marine Money Week in New York on Tuesday, the Belgian tanker giant’s head of investor relations, Brian Gallagher, said it would be a “grind” for the largest tankers to start earning higher rates.
“I think it’s going to take some time, but it’s a catalyst we’ve seen in the sectors,” he said of the invasion. “The VLCCs, though, are a slightly strange beast, in that there’s an oversupply of ships.”
He said the number of ships carrying sanctioned cargoes — an issue several owners have discussed as a hurdle for the sector — is difficult to factor in, as is the lack of scrapping despite low rates and high steel prices.
“We would see it progressing that way, but it's going to be a grind. I think everyone wants to see that strike of lighting and everything moving very fast,” Gallagher said.
“But of course as an industry we need to get back to the consumption of oil in [the fourth quarter of] 2019. I think if we can get some consistency and velocity into the market, it can drive things.”
Before Russia invaded, Gallagher said 48% of VLCCs were headed from the Middle East Gulf to the Far East, compared with a much more segmented suezmax trade.
Since then, volumes for aframaxes and suezmaxes are lower, but the ships are travelling longer distances, while Europe is attracting a few more VLCCs from the Atlantic and Middle East.